Lawsuit Hinges On Whether 'That's So Gay' Is an Anti-Gay Putdown

Lawsuit Hinges On Whether 'That's So Gay' Is an Anti-Gay Putdown

When a few classmates razzed Rebekah Rice about her Mormon upbringing with questions such as, "Do you have 10 moms?" she shot back: "That's so gay."

Those three words landed the high school freshman in the principal's office and resulted in a lawsuit that raises this question: When do playground insults used every day all over America cross the line into hate speech that must be stamped out?

After Rice got a warning and a notation in her file, her parents sued, claiming officials at Maria Carillo High in Santa Rosa, Calif., violated their daughter's First Amendment rights when they disciplined her for uttering a phrase "which enjoys widespread currency in youth culture," according to court documents.

Testifying last week about the 2002 incident, Rice, now 18, said that when she uttered those words, she was not referring to anyone's sexual orientation. She said the phrase meant: "That's so stupid, that's so silly, that's so dumb."

But school officials say they took a strict stand against the putdown after two boys were paid to beat up a gay student the year before.

"The district has a statutory duty to protect gay students from harassment," the district's lawyers argued in a legal brief. "In furtherance of this goal, prohibition of the phrase 'That's so gay' ... was a reasonable regulation."

Superior Court Judge Elaine Rushing plans to issue a ruling in the non-jury trial after final written arguments are submitted in April. Her gag order prevents the two sides from discussing the case.

Derogatory terms for homosexuality have long been used as insults. But the landscape has become confusing in recent years as minority groups have tried to reclaim terms like "queer," "ghetto" and the n-word.

In recent years, gay rights advocates and educators have tried teaching students that it is hurtful to use the word "gay" as an all-purpose term for something disagreeable. At Berkeley High School in Berkeley, Calif., a gay student club passed out buttons with the words "That's so gay" crossed out to get their classmates to stop using them.

Rick Ayers, a retired teacher who helped compile and publish the "Berkeley High School Slang Dictionary," a compendium of trendy teen talk circa 2001, said educating students about offensive language is preferable to policing their speech.

"I wouldn't be surprised if this girl didn't even know the origin of that term," he said. "The kids who get caught saying it will claim it's been decontextualized, but others will say, 'No, you know what that means.' It's quite talked about."

Rice's parents, Elden and Katherine Rice, also claim the public high school employed a double-standard because, they say, administrators never sought to shield Rebekah from teasing based on Mormon stereotypes.




Christopher Phelps & Associates, LLC v. Galloway

4th Cir.
02-12-2007
Niemeyer, Circuit Judge
05-2266

PUBLISHED
Argued: October 24, 2006

Before NIEMEYER, MOTZ, and TRAXLER, Circuit Judges.

Affirmed in part, vacated in part, and remanded by published opinion. Judge Niemeyer wrote the opinion, in which Judge Motz and Judge Traxler joined.

OPINION

After R. Wayne Galloway began construction of his retirement home on Lake Wylie, near Charlotte, North Carolina, using architectural plans designed and copyrighted by Christopher Phelps & Associates, LLC ("Phelps & Associates"), without permission, Phelps & Associates commenced this action against Galloway for copyright infringement. Phelps & Associates sought damages, disgorgement of profits, and injunctive relief. A jury found that Galloway infringed Phelps & Associates' copyright and awarded it $20,000 in damages, the fee that Phelps & Associates traditionally charged for such plans. The jury also found that Galloway had realized no profits to disgorge. The district court thereafter declined to enter an injunction, finding that the jury verdict had made Phelps & Associates "whole," and entered judgment in favor of Phelps & Associates for $20,000. From that judgment, Phelps & Associates appeals, requesting a new trial on damages and the entry of an injunction prohibiting the future lease or sale of the infringing house and mandating the destruction or return of the infringing plans.

We agree with Phelps & Associates that the district court erred during the damages phase of trial in instructing the jury that Phelps & Associates' copyright was a derivative work. As we explain herein, Phelps & Associates held a copyright in the entire work manifested in Galloway's house. We conclude, however, that the error was harmless. We also reject Phelps & Associates' challenges to evidentiary rulings. Accordingly, we affirm the judgment incorporating the jury's verdict.

We agree with Galloway's contention that the court in the circumstances presented here may not issue a permanent injunction, as requested by Phelps & Associates, prohibiting Galloway from ever leasing or selling the house. Not only would such an injunction unduly restrain the alienation of real property, it would violate the "first sale doctrine" in 17 U.S.C. § 109(a), which we hold authorizes Galloway to sell or otherwise dispose of the house as a copy for which the remedies in a copyright action have been paid. Other injunctive relief, however, might be available in applying the general principles of equity, as required by eBay Inc. v. MercExchange, L.L.C., 126 S.Ct. 1837 (2006), which was decided after the district court's order denying relief in this case. Accordingly, we vacate portions of the district court's order denying injunctive relief and remand for the limited purpose of reconsidering other equitable relief, such as an order requiring Galloway to destroy the infringing plans or return them to Phelps & Associates.

I.

R. Wayne Galloway, in anticipation of retirement, planned to build his "dream home" on a lot that he owned on the North Carolina side of Lake Wylie, southwest of Charlotte, North Carolina. Displeased with the design work done by an architect whom he had hired, Galloway went with his son-in-law to view the designs of homes on Lake Norman, an expensive residential area about 30 miles north of Lake Wylie, where his son-in-law was working as an iron-work subcontractor. There, Galloway saw a French-country style house that he liked. His son-in-law approached the builder of the house, Simonini Builders, Inc., and asked the superintendent for a copy of the plans. The superintendent said that Galloway would have to speak with the owner, Mrs. Gina Bridgeford, because "she purchased the plans, they were actually drawn for her." Galloway contacted Mrs. Bridgeford, who gave Galloway her consent for use of the plans "as long as you don't build in our area." As to her authority to give consent, Mrs. Bridgeford testified at trial, "I felt with all we had paid, we owned the plans at that time." Galloway assured Mrs. Bridgeford that he would not build in the area, telling her that he planned to build on Lake Wylie about 30 miles away. With Mrs. Bridgeford's permission, the superintendent at Simonini Builders gave Galloway a copy of the plans for "The Bridgeford Residence." Each page of the plans included the copyright notice, in small print, of the designing architect as follows:

(c) 2000 Copyright - Christopher Phelps & Assoc., L.L.C. These plans are protected under the federal copyright laws. The original purchaser of this plan is authorized to construct one and only one home using this plan. Modifications or reuse of this plan is prohibited.

Galloway altered the plans only to cover the name and address of "The Bridgeford Residence" with the name and address of "The Galloway Residence," and then he copied them for constructing his house.

Phelps & Associates, which designed the Bridgeford Residence, is an architectural firm in Charlotte, North Carolina, that designs upscale custom houses. It created the design for the Bridgeford Residence as a variation of its earlier design - "The Bell and Brown Residence." Bell and Brown had commissioned and paid Phelps & Associates for the earlier design, but ultimately decided not to build the house. Phelps & Associates modified the Bell and Brown design somewhat for the Bridgefords by moving a dormer window, changing the front entry and reconfiguring part of the floor plan, and removing the basement. The Bridgefords paid Phelps & Associates $20,000 for The Bridgeford Residence design, and the Bridgefords built their house on Lake Norman in accordance with that design.

Acting as his own general contractor, Galloway began construction of his house in September 2001, using the Phelps & Associates plans for the Bridgeford Residence. During the course of construction, some of the subcontractors checked back with Phelps & Associates for clarification, particularly with respect to the windows. Phelps & Associates did not then know that the construction was being pursued without permission. Galloway's framing contractor, who had been asked to do some work for Galloway's brother-in-law using pirated Phelps & Associates plans, surmised that Galloway did not have permission to use the plans and approached Galloway to warn him that he could "get in trouble constructing a copyright plan." Galloway "shrugged his shoulders and said something to the effect: 'They've got to find me, catch me first.'"

Through rumors from subcontractors, Phelps & Associates learned in early 2003 that Galloway was constructing a house using its designs. After confirming that fact, Phelps & Associates sent Galloway a cease and desist letter in July 2003. Upon receipt of the letter, Galloway stopped construction on his house, which was then over half completed. Thereafter, in August 2003, Phelps & Associates registered its plans for The Bridgeford Residence with the Copyright Office and then commenced this action against Galloway for copyright infringement.

In its suit, Phelps & Associates sought compensatory damages, disgorgement of Galloway's profits (claimed as the difference between the value of Galloway's house and his provable expenses in constructing it), and injunctive relief. With respect to compensatory damages, Christopher Phelps, the principal of Phelps & Associates, testified at trial that if Galloway had come to him and asked Phelps & Associates to design "a house like the Bridgeford house," Phelps & Associates would have charged Galloway $20,000 - the same fee that it had charged Mrs. Bridgeford. Christopher Phelps made clear, however, that he would not have sold Galloway the actual Bridgeford Residence design, but something different, as Phelps & Associates prided itself on designing "custom homes." With respect to Galloway's profits, Phelps & Associates presented expert testimony that Galloway's house would be worth $1.1 million when completed. With this estimated value, Galloway would have realized over $200,000 in profits if he were to sell the completed house.

Galloway testified at trial that he would have made no profit in the house had he sold it - he had spent more on the house than it was worth. He estimated that if he completed the house, he would show a loss of about $160,000. He introduced into evidence his receipts and ledger of expenditures for construction to date totaling approximately $660,000, and he estimated that it would cost an additional $250,000 to $300,000 to complete the house. He estimated that upon completion, the house itself would be worth $758,000. He also introduced into evidence the Mecklenburg County tax assessment of his house when half-completed, which evaluated the house in that state at $408,100.

At the end of the trial, the jury returned a verdict in favor of Phelps & Associates, finding that Galloway had infringed Phelps & Associate's architectural design copyright; awarding Phelps & Associates $20,000 in actual damages; and finding that Galloway had no profits to disgorge. Thereafter, Phelps & Associates requested injunctive relief from the court (1) ordering that the infringing copy of the plans be returned or destroyed; (2) enjoining completion of the house; and (3) permanently enjoining the lease or sale of the house. The court "in its discretion" denied all injunctive relief, finding that the $20,000 jury award made Phelps & Associates "whole." Accordingly, the court entered judgment in favor of Phelps & Associates for $20,000 in damages.

On appeal, Phelps & Associates contends that it is entitled to a new trial on damages because the district court erroneously instructed the jury that "The Bridgeford Residence" design was a derivative work and made certain erroneous evidentiary rulings. It also argues that the district court's refusal to enter an injunction was error as a matter of law because it had proved a past infringement and a likelihood of future infringement.

Phelps & Associates did not obtain an injunction pending appeal, and, according to representations made at oral argument, Galloway has completed the construction of his house, where he now resides. Galloway has also satisfied the $20,000 money judgment. II.

To obtain a new jury trial on damages, Phelps & Associates argues that the district court (1) erred in instructing the jury on the scope of its copyright, telling them erroneously that Phelps & Associates' design was a derivative work, not an original work in its entirety; and (2) abused its discretion by making several evidentiary rulings. We address these contentions in turn.

A.

Phelps & Associates contends first and principally that the jury was improperly instructed that its copyright in the Bridgeford Residence design was a derivative work of the earlier design of the Bell and Brown Residence and that the scope of Phelps & Associates' copyright consisted only of the minimal difference between the two designs. The jury was instructed:

[Phelps & Associates'] copyright in the architectural work known as the Bridgeford Residence is a derivative work of the architectural work known as the Bell/Brown Residence.

A derivative work is a work that is based upon one or more pre-existing works, including a revision, transformation, or adaptation of a pre-existing work.

[Phelps & Associates'] recovery is limited by the scope of copyright protection afforded a derivative work. You are instructed that the copyright protection in a derivative work covers only the additions, changes, or other new material appearing for the first time in the work.

It does not extend to any pre-existing material and does not imply a copyright in that material. The copyright in a compilation or derivative work extends only to the material contributed by the author of such work, as distinguished from the pre-existing material employed in the work, and does not imply any exclusive right in the pre-existing material.

The copyright in such work is independent of, and does not affect or enlarge the scope, duration, ownership, or substance of any copyright protection in the pre-existing material.

Phelps & Associates contends that this instruction essentially told the jury that the copyright consisted of the relocation of a dormer window, a few floor plan changes, and the lack of a basement, and that the jury accordingly attributed no profits to the infringement.

Galloway argues that the derivative work instruction was accurate - that Phelps & Associates' copyright only extended to the new material embodied in the Bridgeford Residence - and that its registration of the Bridgeford Residence design did not effect a registration of the many elements common to the Bridgeford Residence design and the Bell and Brown Residence design.

We agree with Phelps & Associates that the instruction was erroneous. The Bridgeford Residence was not a derivative work as defined in the Copyright Act; Phelps & Associates held a copyright in the entire design. Galloway's position misunderstands a fundamental precept of copyright law, that a copyright is independent of its registration.

Both parties properly recognize that the copyright in a derivative work extends only to the new elements contributed by the author and does not extend to the underlying work. See 17 U.S.C. § 103(b). That provision assures that the author of a derivative work does not acquire ownership over constituent material that is already in the public domain or is owned by someone else. But when the author of the derivative work also has a copyright on the underlying work, there is no need to protect the public domain or the author of the underlying work, as the entire work is that of the single author.

Galloway's emphasis on the scope of Phelps & Associates' registration of the Bridgeford Residence design places more emphasis on the registration than the Copyright Act provides. The copyright itself does not depend on registration. See 17 U.S.C. § 408(a) ("[R]egistration is not a condition of copyright protection"). It is obtained without formalities simply when a work has been fixed in a tangible medium of expression. See id. §§ 102(a), 408(a). Once fixation of an original work has taken place, the author has a copyright in the work, and registration with the Copyright Office serves only supporting roles. For instance, it provides evidence of a copyright, see id. § 410, and it is required as a condition to bringing suit, see id. § 411.

In this case, the undisputed facts are that Phelps & Associates was the author of the Bell and Brown Residence design and therefore owned the copyright in that work, even though it never registered that copyright. Phelps & Associates was also the author of the Bridgeford Residence design, which was a modification of the Bell and Brown Residence design. Phelps & Associates did register the Bridgeford Residence design, but not as a derivative work. It simply registered the entire design, as it was the author of the entire design.

While Phelps & Associates only registered the Bridgeford Residence design, that registration satisfied the prerequisite for suit under 17 U.S.C. § 411 for the entire design, even though some of it was created earlier in the form of the Bell and Brown Residence design. See Xoom v. Imageline, Inc., 323 F.3d 279, 283-84 (4th Cir. 2003) (holding that a party has standing to sue on all components of a registered work if he owns a copyright on those components, even if the underlying components have not been registered); 2 Melville B. Nimmer & David Nimmer, Nimmer on Copyright § 7.16[B][2][c], at 7-173 (perm. ed., rev. vol. 2006) (same). Therefore, even if Phelps & Associates had only registered the Bridgeford Residence design as a derivative work, it could have sought damages and profits for infringement of all of the components, including those embodied in the Bell and Brown Residence design, because it held the copyright in all of the components. The scope of registration need not precisely trace the scope of the copyright for the holder to sue. See Educ. Testing Serv. v. Katzman, 793 F.2d 533, 538-39 (3d Cir. 1986) ("[T]he statutory premise that the copyright in a compilation extends to the constituent material contributed by the author is express"); Morris v. Business Concepts, Inc., 259 F.3d 65, 68 (2d Cir. 2001) (same).

Accordingly, Phelps & Associates was entitled to sue for remedies based on infringement of the entire Bridgeford Residence design, even though that design included components of an earlier work created by Phelps & Associates; it was the author and therefore owner of the copyright in all of the copyrightable design elements. The instruction given by the district court to the jury was therefore erroneous.

Nonetheless, we conclude that the error was harmless. Three different aspects of the trial - the district court's other instructions, the evidence presented at trial, and the jury's verdict - indicate that the jury followed the other instructions given by the district court and understood that they were to award damages based on the entire Galloway house as an infringement of the Bridgeford Residence design.

First, when instructing the jury about the relief it was to consider if it found infringement, the court correctly stated that Phelps & Associates would be entitled to both actual damages for infringement and to all profits of the infringer resulting from the copyright infringement. See 17 U.S.C. § 504. In instructing the jury about the actual damages, the court said:

Actual damages for infringement are measured according to market value, which means what a willing buyer would have been reasonably required to pay a willing seller for the copyright holder's work.

Stated differently, this amount is what [Phelps & Associates] would have received from a willing buyer as a reasonable licensing fee for the use of the Bridgeford Residence architectural works.

(Emphasis added). On actual damages, Phelps & Associates introduced evidence that it charged Mrs. Bridgeford $20,000 as its fee for the Bridgeford Residence design. Christopher Phelps testified further that if Galloway had come to him to create a similar design, Phelps & Associates would likewise have charged Galloway a $20,000 fee. There was no other evidence on Phelps & Associates' actual damages as they were defined by the court's instructions. In returning a verdict, the jury awarded Phelps & Associates $20,000, consistent with the evidence about the licensing fee for the entire Bridgeford Residence design. Had the jury paid attention to the court's instruction on derivative works, it would have awarded a licensing fee only for the elements added by the Bridgeford Residence design to the Bell and Brown Residence design, i.e. a relocated dormer and a slightly reconfigured floor plan. There was no evidence, however, of the market value of these design elements, if they had any substantial value at all. And if the jury speculated on this matter, having no evidence of the design value of the two elements, it would have given Phelps & Associates only a portion of the $20,000 fee that represented the full licensing fee charged by Phelps & Associates for the entire house.

With respect to the profits for which Phelps & Associates sought disgorgement, the district court instructed the jury:

In addition to its actual damages, the law allows a copyright holder to recover all profits of the infringer resulting from copyright infringement.

An infringer's profits consist of the amount of the infringer's gross revenues from the infringing activity less the expenses of producing the infringing work.

Relating this general instruction about profits to the circumstances of this case, the district court referred the jury to the costs of the entire house less the expenses incurred in constructing the entire house. The court stated:

Galloway bears the burden of proving the expenses he incurred in constructing the house at issue. If he fails to prove his direct expenses, you must find the amount of his gross revenues as the amount of his profits.

For an item to be a deductible expense, Galloway must prove that he actually incurred such amounts in the construction of the house in question, and that such expense actually assisted in the construction of the house in question.

(Emphasis added). Again, no evidence was introduced to the jury from which to conclude what the profits were for the minor design changes between the two works - the addition of the dormer and the changed configuration of the layout. All of the evidence focused on the market value of the entire house and the expenses that Galloway incurred in constructing it. In response to the court's instructions and the evidence, the jury found that Galloway realized $0 in profits. If the jury had believed that Galloway actually had profits from the two changed elements, it would have allocated some amount to those elements. Whether that was $2,000 or a nickel, some amount of infringer profits would be associated with the relevant design changes. Because $0 was given in profits, the jury apparently credited Galloway's position that there were no profits in the house. This conclusion was amply supported by the evidence presented, which included Galloway's own valuation, the county tax assessment, and the loss taken by the Bridgefords when they sold their identical house.

If the jury had given effect to the court's instruction relating to derivative works, it would have applied that instruction to both its award of actual damages and its finding with respect to infringer profits. Yet such an application is belied by the verdict itself.

Not only does the jury's verdict of $0 in profits reveal that it considered profits from the entire house design despite the derivative work instruction, finding that none were proved, the district court's other instructions overrode any prejudicial effect that might have resulted from the erroneous instruction. The court gave instructions telling the jury how to apportion damages between conduct that was infringing and conduct that was not. The instructions imposed the burden on Galloway to prove any profits attributable to non-infringing conduct. On a failure of that proof, the jury was instructed to award all profits realized from the house. As the court stated:

Moreover, if non-infringing factors are so intertwined with infringing factors that it is impossible to apportion profits, then no apportionment is allowed.

All profits should be deemed attributable to the infringement unless Galloway proves by a preponderance of the evidence that they are not.

If you have any doubts as to the amount of the profits or whether they resulted solely due to other factors, you must resolve those doubts in favor of [Phelps & Associates].

Galloway did not present any evidence of apportionment at trial to give effect to this apportionment instruction or the derivative work instruction. Consequently, the jury was instructed to award damages as if the entire house was an infringement of Phelps & Associates' copyright. It could have awarded $0 in profits only if it concluded there were no profits at all. While the jury did award Phelps & Associates the full amount of actual damages that it claimed and proved, the jury concluded that Galloway had realized no profits. If the jury had found any profits and if Galloway had carried his burden on apportionment, the jury still would have given some amount of the profits to Phelps & Associates in accordance with both the apportionment instruction and the derivative work instruction. Its failure to do so satisfies us that the jury did not believe there were any profits.